Several land transactions are set to attract Goods and Services Tax (GST) to comply with the Appellate Authority of the Advance Judgment (AAAR) regime that differentiates between “developed land” and “waste land”.

This means that if the developer or seller has done any work on the parcel of land before selling it, then it may attract GST.

Any land sold after development activities such as providing water lines, electricity or sanitation facilities should attract 18% GST, Madhya Pradesh AAAR ruled.

it canceled the order Madhya Pradesh Authority Advance Ruling (AAR) states that sale of developed land is not liable to GST as the transaction is transfer of immovable property which is outside the purview of indirect tax.

“This is yet another example of different decisions by different state authorities,” said Harpreet Singh, indirect tax partner at KPMG in India. “In the past, Madhya Pradesh and Goa Advance ruling authorities have considered the sale of developed land to be non-taxable as the transaction continues as sale of immovable property.

The Madhya Pradesh AAR had earlier rejected the applicability of GST on the sale of developed land, holding that it “cannot be bought and sold as something separate and distinct from a plot of land” and hence, the GST on such sale Not applicable.

However, the AAAR ruling stated that the real estate developer who sold the land had developed roads and supplied water before selling the land. And that sales “cannot be imagined without these basic development activities”.

Tax experts said there could be an alternative argument as well.

“There is a strong alternative argument that improvements on barren land are made only to make it salable, and that this should not change the essential character of the transaction from supply of land to construction service, especially when buyers were not already determined. Time to reform,” Singh said.